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Quitting Your Job Without a New Offer – Can You Afford to Resign?

Almost everyone has entertained fantasies of walking out of their job one day. If your boss isn’t the greatest, perhaps you’ve imagined telling them off too. But the COVID-19 pandemic brought a host of changes to the workplace and what workers expect from their jobs, so many people are departing the workforce or considering a career change.

In its 2021 Work Trend Index, Microsoft surveyed over 30,000 people in 31 countries about their thoughts on work. Their results found that 54% of Generation Z workers (those aged 18 to 25) were thinking of quitting their jobs. Across the entire global workforce, that figure was 41%.

Leaving a bad job may be the best way to change your life, improve mental health, and increase happiness. But to quit your job without arranging a new one leaves you vulnerable to hardship. Before you quit your job, think through every aspect of the decision — especially financial implications — to be sure it’s the right path for you.

Determine How Much Money You Should Have Saved

If you want to quit your job, once you’ve landed on your reasons why, consider the financial ramifications. Usually, to quit your job without disrupting quality of life, you have to rely on savings for a time. It’s different if you’re quitting with a new job offer already on the table.

The question is whether you can afford to quit your job now, even without another position lined up. You have to decide how much time you expect to be unemployed, and save enough money to cover your bills while pursuing other job opportunities.

1. Examine Your Budget

A key step before resigning from your job is examining your budget. Normally, your budget is a balance sheet of income and expenses, but for the sake of preparing for unemployment, expenses are the main focal point.

Perhaps you already follow a budget every month — great! If that’s the case, simply revisit your budget with an eye toward a potential loss of income. If you don’t already do some form of budgeting, start now, before making any major employment decisions.

The budget is pivotal to any plan to quit your job. If you don’t have a solid idea of how much money you spend every month, you don’t have any way to estimate your financial needs and quit confidently.

Try one of several great budgeting apps to monitor your spending. While some charge fees, others are completely free and could be game-changing, helping you see your finances clearly.

When you examine your budget in this context (wanting to quit your job), pay attention to which budgeting categories are essential and which are luxuries. Chances are, you’ll note a few monthly expenses that you could cut out temporarily, like a gym membership or streaming subscription.

By separating necessities from luxuries, you decrease monthly spending. Your strict “bare-bones” budget may enable you to quit your job sooner, or take a little longer to find a new job. Because this lowers your monthly expenses, your savings stretch further.

This exercise of separating wants from needs is useful in showing you how dissatisfied you are at work. Your willingness to sacrifice discretionary expenses can illuminate how badly you want to quit. If you don’t want to give up anything, you need to save according to your normal budget — and stay at your job longer.

2. Consider Additional Career Expenses

Perhaps your motivation in quitting your job is to train for a new career or pivot directions within your current career. If so, be sure to calculate any job search expenses like education or training fees, professional attire, travel, and resume services.

If this requires an entire bachelor’s degree, that’s a major commitment of time and money. It would mean even more careful consideration — getting a spouse or partner on board to support you through that process, securing a good part-time job, and feeling confident of that chosen career path.

But if you’re pursuing a better job that requires something more manageable, like a three-month training program, that’s simple to calculate into your budget and savings needs. Factor in any fees or costs associated with career education along with your regular budgetary expenses.

Maybe you’re quitting your office job to pursue remote employment. It’s considered a real perk to many people these days. In the 2021 State of Remote Work survey conducted by Buffer Doist, Remotive, and We Work Remotely, responses were overwhelmingly positive about remote work arrangements.

An overwhelming 97.6% of survey respondents said they wanted to continue working remotely at least part-time for the rest of their careers. The biggest benefits of remote work, they said, were flexible schedule (32%) and flexibility of location (25%). Remote work could offer a huge boost to your well-being.

If your goal is to work remotely, you might need to spend some money to outfit your home office. While high-end furnishings are not necessary to work productively from home, budget for essentials like a reliable laptop or Internet service.

Child care may be an issue as well if you’re a working parent. Don’t expect to cut out all child care costs while you’re unemployed, because training and looking for a new job are a lot of work. Children can’t come along on job interviews or to classes.

Even if working remotely is your plan, keep in mind that working from home with kids isn’t ideal. To focus properly on work, expect to pay for child care at least some of the time.

3. Have a Fully Funded Emergency Fund

When quitting a job to seek new training or employment, it’s time to evaluate the strength of your emergency fund. Most experts consider three to six months’ worth of expenses to be a full emergency fund.

Remember, you also need an emergency fund for emergencies that could occur while you’re not working. Cars can still break down, accidents can happen, or a death in the family might require a cross-country trip for the memorial service.

Don’t rely on your normal emergency fund to bridge the gap between jobs. Although some of that assists you in case of a loss of income, you shouldn’t spend down the entire fund while looking for a new job. Keep it available for unexpected costs. It’s an extra safety net in case your job hunt takes longer than anticipated due to the job market or other factors.

Employment Benefits to Consider

When you start thinking seriously about leaving your job, it’s not only the salary or pay rate that you lose. Benefits outside of your base pay and bonuses are essential to maintaining your lifestyle and protecting you and your loved ones. Even if they don’t have a fixed monetary value, they definitely impact your bottom line and the way you evaluate the job market.

1. Health Insurance

Health insurance is a huge issue and one factor that might prevent you from quitting your job, at least until you’ve received another job offer. The cost of health care in the United States is high: The Centers for Medicare and Medicaid Services reported that in 2019, health care spending grew in the U.S. to an average cost of $11,582 per person per year.

Costs like that mean you don’t want to be caught without health insurance coverage, so that’s an employer benefit to consider before handing in your resignation letter.

One possible solution is the COBRA health insurance program. It offers some employees the option to continue health insurance coverage through a group plan for a limited length of time.

If that doesn’t apply to your situation, see whether you could switch to coverage under your spouse’s insurance plan. Or look into other options for managing your health care costs without insurance.

2. Paid Leave

Does your employer offer paid leave for circumstances like giving birth to or adopting a child? If you anticipate an event that qualifies you for the Family and Medical Leave Act, or FMLA, think carefully before quitting a job with that option.

FMLA requires some types of employers — but not all — to offer maternity, paternity, or adoption leave. Eligible employees can take up to 12 work weeks of leave during a 12-month period due to birth, adoption, health issues, or a family member being called for active military duty.

3. Paid Vacation Time

Paid time off for general reasons could be another incentive to stay rather than quit. Check around at other employers or other industries you’re considering. Do they seem to provide better vacation time for their employees or worse than your current employer?

You might have worked for your employer long enough to earn extra vacation days each year, and starting at a new company may mean starting over at square one. While not necessarily a deal-breaker, it’s one of the intangible benefits of a job to keep in mind when considering quitting.

4. Flexible Work Schedule

Remote work or a flexible work schedule is another perk some employers offer. If your current employer allows you to work remotely a few days per week, think about whether you’re willing to give that freedom up for an unknown new position that might not afford you that flexibility.

How to Save Money Before Quitting Your Job

When you calculate all your monthly expenses, remember to cut out luxuries but factor in possible extra costs for lost insurance or benefits. Then make a savings plan.

If your emergency fund and additional savings aren’t sufficient yet, the first step is to cut out the nonessential expenses. Get rid of discretionary expenses like gym memberships, concert tickets, dinners out, and vacations while you’re still working to pocket the savings. Find free alternatives to nonessential expenses.

It may be possible to pause retirement contributions as well, but be cautious. Be sure to treat deferring retirement savings as temporary and commit to resuming contributions as quickly as possible once your new job is off the ground.

Explore other money-making possibilities to help boost your savings. Garage sales or selling your possessions through online marketplaces can be lucrative if you have items people want.

Are you a two-car household that could get by with one car? You could sell your car for a nice chunk of cash, helping to pad your emergency fund while you’re looking for a different job.

Brainstorm other strategies to bring in added income and other ways to spend less month to month. Every little bit inches you closer to your goal of quitting your job.

What to Do With Your Retirement Accounts When You Quit

If you have a 401(k) or other employer-sponsored retirement account, figure out the best way to take that money with you. The IRS has specific guidelines to follow to avoid tax penalties on early withdrawals.

If you’ve been putting money into an employer-sponsored account such as a 401(k), 403(b), or 457(b), a few options are available to you.

  • Some companies allow you to keep your account even after you’re no longer employed there, which may be wise while searching for a job.
  • You may roll over the money in your 401(k) to a traditional or Roth IRA. Keep in mind that you may owe income tax on the amount transferred into a Roth IRA.
  • Roll over the money into a retirement account under your new employer (once you find one).
  • Withdraw the entire balance of the account. This provides you with some instant cash, but at a high cost. Taking a distribution from a 401(k) or similar account before the designated retirement age results in a 10% early withdrawal penalty on top of your regular income tax rate.

Maximize any retirement funds you’ve already accumulated through your current employer and avoid early withdrawal penalties if possible. It’s better to strategically save money and cut out discretionary expenses to help fund your time off work instead of robbing your future self.

What If You’re Not Financially Ready to Quit?

After running through these exercises, what if you find that you’re not quite financially prepared to quit your job? Endless number-crunching doesn’t magically make quitting your job a wise idea.

It’s possible you’ll calculate your monthly budget and come up short. Maybe you don’t know how you’ll pay for that new career training, or you’ve cut out everything imaginable and still can’t see a way to make it work. What if you still can’t bear the thought of staying at your job?

This may come down to a gut feeling. If you’ve been struggling for years in one job or one career and continue to dread going to work, it can seem an impossible punishment to stay even one more day.

1. Begin Looking for Your Next Job Immediately

Don’t overlook the obvious solution to not being financially ready to quit: securing a new job as quickly as possible. This may not be possible if you need more training, but if you’re simply looking to move on within your current field, get busy with your job search now.

Update your LinkedIn profile and begin searching for networking and job opportunities there. Talk with job recruiters if that applies in your field. Get solid career advice from trusted mentors, whether at your current job or elsewhere.

Job hunting is a job in itself, so being proactive before leaving your employer could help you find your new role more quickly.

2. Temporary Jobs May Be the Solution

There’s a reason temporary jobs exist: people sometimes just need a little bit of income for an interim season. Consider taking part-time or gig work after quitting your job; that will help fund your needs for the weeks or months of job searching.

You may really need to get out of your job as soon as possible. If it’s a toxic work environment or there’s some other urgent reason for leaving, don’t be afraid to earn money through a side gig, like driving for Uber or walking dogs. You also may be drawn to a legitimate work-from-home opportunity.

A part-time or temp job doesn’t even have to mean sacrificing benefits. Certain companies offer health insurance for part-time employees, so it’s worth checking into one of them for employment to bridge any gap between your current job and future full-time employment.

3. Negotiate With Your Current Employer

What if you consider all of the financial and personal factors involved in your job and realize that quitting your job isn’t really the answer? You might decide you actually like your employer, but you simply need more flexibility, a pay raise, or bigger challenges. Get creative about ways your current job could make you happier with a few simple changes.

If working from home three days per week would solve most of your problems with your current job, perhaps you could negotiate a flexible or remote working schedule with your boss. It’s worth a try, and saves you the hassle of quitting your job and searching for a new one.

4. Start a Side Hustle While Employed

If you’ve done the math and aren’t comfortable with quitting your job outright, another route to consider is starting a side hustle. This is a job you can do in your free time, outside of work, building up your business gradually.

If you already know the type of work you want to do, research how others have successfully built side hustles in that niche, and fit it around your current availability. The idea here is to build clientele and credibility in your new field without giving up your day job.

Side hustles aren’t always the easiest route — they can demand a lot of your time and affect your personal life. But whether your goal is to build up savings or turn your side hustle into a full-time job, some sacrifices are necessary.

Many freelancers and side-hustlers have turned their side gigs into their main source of income. It’s challenging to avoid burnout, but remember that this time of double duty at both your full-time job and your side hustle is only temporary.

If you’ve built your side hustle for some time already and you’re struggling to keep up with demand and handle your regular job responsibilities, it may be time to take the plunge and quit the job. This frees up your time and energy to focus solely on the side gig, making it easier for you to build that business into your dream job.

Final Word

Many of us daydream about the thrill of quitting our jobs, but it’s a decision not to be taken lightly. After all, your livelihood is largely wrapped up in your job, so be sure your financial life is in order before making such a big decision.

Quitting your job before getting a new job offer can be the right choice if you plan your exit carefully. This provides peace of mind while waiting and preparing to start a new job because you know you can cover your financial needs during the transition.

Kate Underwood is a former high school French and English teacher who has turned her obsession with personal finance into a career. Her work is featured at Money Crashers and elsewhere on the web, covering side hustles, debt payoff, investing strategies, and more. She loves making finance more accessible to everyone. In her free time, she loves to hike and hang out with her husband and kids.

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